Global Bike Inc. MOTIVATION A general understanding of GBI (the company) prior to embarking

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1 CASE STUDY Global Bike Inc. Background and overview of GBI strategy and operations Product SAP ERP GBI 2.0 client Level Undergraduate Beginner Focus Company Background Author Jeff Word (SAP) Simha Magal (GVSU) Stefan Weidner (Magdeburg) Version 1.0 (Mar. 2011) MOTIVATION A general understanding of GBI (the company) prior to embarking on hands on exercises in the SAP client (GBI 2.0) is critical for success. This document provides a historical background for how GBI began and an overview of its operations and strategy. This information will be used extensively throughout the exercises. PREREQUISITES None Please send any suggestions for improvement to gbi@extrabandwidth.com 2010 SAP AG

2 GBI Overview Company History Global Bike Inc. has a pragmatic design philosophy that comes from its deep roots in both the off-road trail racing and long-distance road racing sports. Nearly 20 years ago, its founders designed their first bikes out of necessity they had races to win and the bikes that were available at the time did not perform to their extremely high standards. So, they took matters into their own hands and built legendary bikes that would outlast and outperform the competition. From these humble origins, Global Bike Incorporated was born and continues to deliver innovative high-performance bicycles to the world s most demanding riders. This heritage of entrepreneurial spirit and quest for design perfection is still the cornerstone of GBI s corporate philosophy. GBI produces bikes for the most demanding competitors whether the competition is on pavement or dirt, for money, fame or just bragging rights. John Davis earned his racing scars in the mountain racing circuit in America, where he won numerous downhill and cross-country championships. Early on, John realized that the mass-produced bicycles available were inadequate in many ways for the type of racing he was doing. So, John stripped four of his old bikes down to the bare metal and rebuilt them into a single Frankenstein bike that he rode to win the national championship. Once news of his Frankenstein bike got out, John s friends - and even his competitors - began asking him to build them a Frankenstein bike too. While recovering from an injury in 1990, John started producing the first series of Frankenstein bikes in his garage each one custom-built from cannibalized parts from other bikes. As more and more orders came in, John successfully expanded Frankenstein Bikes from his garage operations into a full-blown manufacturing facility in Dallas and began producing custom trail bikes which he sold through a network of specialized bike dealers throughout the country. At nearly the same time, halfway around the world in Heidelberg, Germany, Peter Weiss was studying engineering and competing in regional touring races on weekends. In between his races and studies, Peter worked at a bike shop in Heidelberg, fixing student bikes and tuning the touring bikes that he and his friends rode for competitions. As Peter s reputation as a fierce competitor and mechanical wizard grew, he also began to design and build road bikes based on an ultra-light composite frame that he had created for one of his engineering courses. Peter s innovative use of carbon composite materials allowed him to build a frame that was significantly stronger and one tenth the weight of competing frames. As a student, Peter did not have a great deal of financial resources, so he partnered with a local company that manufactured his frame designs as a contract manufacturer. Soon, Peter s frames were being used by 2011 SAP AG Page 2

racers all over Europe and he started Heidelberg Composites to market and design frames which would be fabricated by a contract manufacturer on a larger scale.

Through a twist of fate, Peter and John met each other in 2000 and immediately recognized their mutual passion for performance and complimentary business models.

3 racers all over Europe and he started Heidelberg Composites to market and design frames which would be fabricated by a contract manufacturer on a larger scale. Heidelberg Composites sold its frames to specialized bike stores throughout Europe and directly to racing teams, eventually becoming the leader in lightweight touring frames in Europe. Through a twist of fate, Peter and John met each other in 2000 and immediately recognized their mutual passion for performance and complimentary business models. Each had been looking for a partner in another racing field and each had been looking for a partner in a different market. They quickly realized that a merger between their two companies would be extremely synergistic and that the combination of their product lines and regional distribution channels would generate a great deal of efficiencies. So, in 2001, Heidelberg Composites and Frankenstein Bikes merged to form Global Bike Incorporated. Today, John and Peter share the responsibilities for managing GBI s growing organization as co-ceo s. John is responsible for sales, marketing, service & support, IT, finance and human resources groups and Peter is responsible for research, design, procurement and manufacturing groups from an organizational reporting perspective. Figure 1: GBI organizational structure However, GBI is a process-centric organization, so John and Peter prefer to think of the processes that they are responsible for, rather than the functional areas of the company that report to them. From this perspective, Peter is responsible for Idea-to-Market and Build-to-Stock and John is responsible for Order-to-Cash and Service & Support, as well as the supporting services for all four key processes. The simple way to look at their responsibilities would be to say that Peter spends money and builds products and John sells products and brings in money SAP AG Page 3

4 1 GBI Overview Design Build Sell Support Idea-to-Market 1.1 Product Research 1.2 Product Design 1.3 Product Trials 2 Build-to-Stock 2.1 Production Planning 2.2 Production Management 2.3 Quality Assurance 2.4 Inventory Management Corporate Services 5 Procurement Financials & Controlling 7 Human Resources 8 Information Technology 9 Strategy Management Order-to-Cash 3.1 Marketing Management 3.2 Sales Management 3.3 Partner Management 3.4 Invoice Management 3.4 Service Invoice & Management Support 4.1 Support (Problem-to-Resolution) 4.2 Partner Support Enablement 4.3 Returns & Repairs Figure 2: GBI Enterprise Process Map Corporate Overview Due to several tax and export issues, GBI s headquarters is located in Dallas and GBI is registered as a US company, following US GAAP accounting standards. GBI operates a subsidiary company, GBI Europe, which is based in Heidelberg and is subject to IFRS accounting standards and German tax regulations. Material planning, finance, administration, HR and IT functions are consolidated at the Dallas headquarters. The Dallas facility manufactures products for the US and export markets and its warehouse manages product distribution for the central US and internet retailers. GBI also has warehouses for shipping and export in both San Diego and Miami. San Diego handles West Coast distribution and exports for Asia, while Miami handles East Coast distribution and Latin America exports. GBI Europe has its headquarters in Heidelberg Germany. The majority of research and development is housed in the Heidelberg offices. Heidelberg is also the main manufacturing facility for GBI in Europe. The Heidelberg warehouse handles all shipping for southern Europe. The Hamburg warehouse handles all shipping for the UK, Ireland, Middle East and Africa. GBI sells its bikes throughout the world and employs approximately 100 people, 2/3rds of the employees are in the US and the remaining 1/3 in Europe SAP AG Page 4

In the touring bike category, GBI s handcrafted bicycles have won numerous design awards and are sold in over 10 countries.

5 Product Strategy GBI is a world class bicycle company serving the professional and prosumer cyclists for touring and off-road racing. GBI s riders demand the highest level of quality, toughness and performance from their bikes and accessories. In the touring bike category, GBI s handcrafted bicycles have won numerous design awards and are sold in over 10 countries. GBI s signature composite frames are world-renowned for their strength, low weight and easy maintenance. GBI bikes are consistently ridden in the Tour de France and other major international road races. GBI produces two models of their signature road bikes, a deluxe and professional model. The key difference between the two models is the type of wheels used, aluminum for the basic model and carbon composite for the professional model. GBI s off-road bikes are also recognized as incredibly tough and easy to maintain. GBI off-road bikes are the preferred choice of world champion offroad racers and have become synonymous with performance and strength in one of the most grueling sports in the world. GBI produces two types of off-road bike, a men s and women s model. The basic difference between the two models is the smaller size and ergonomic shaping of the women s frame. GBI also sells an accessories product line comprised of helmets, t-shirts and other riding accessories. GBI partners with only the highest quality suppliers of accessories which will help enhance riders performance and comfort while riding GBI bikes. Product development is the most critical element of GBI s past and future growth. GBI has invested heavily in this area, focusing on innovation, quality, safety and speed to market. GBI has an extensive innovation network to source ideas from riders, dealers and professionals to continuously improve the performance, reliability and quality of its bicycles. Figure 3: GBI Product List 2011 SAP AG Page 5

6 Material # Material Description Quantity ALWA6050 Touring Aluminum Wheel Assembly 2 TRFR4500 Touring Frame - Black 1 DGAM4300 Derailleur Gear Assembly 1 SEAT4600 Touring Seat Kit 1 TOHB4750 Touring Handle Bar Assembly 1 PEDL4800 Pedal Assembly 1 CHAN4900 Chain 1 BRKT5000 Brake Kit 1 WDOC5100 Warranty Document 1 PCKG5200 Packaging 1 Figure 4: Bill of Materials for Deluxe Touring Bike (Black) Distribution Network Given the highly specialized nature of GBI s bicycles and the personalized needs of riders, GBI sells its bikes exclusively through well-known and respected Independent Bicycle Dealers (IBDs). These dealers employ staff members who are experts in off-road and tour racing to help consumers choose the right GBI bike and accessories for their individual needs. Customer Name Street City State Rocky Mountain Bikes Fiddler's Green Circle Denver CO Big Apple Bikes Morton ST New York City NY Philly Bikes West Chester Pike Philadelphia PA Peachtree Bikes Summit Boulevard Atlanta GA Beantown Bikes Van de Graaff Drive Boston MA Windy City Bikes Highland Parkway Chicago IL Furniture City Bikes W Fulton Grand Rapids MI Motown Bikes One Towne Square Detroit MI SoCal Bikes Von Karman Ave Irvine CA Silicon Valley Bikes Hillview Ave Palo Alto CA DC Bikes Pennsylvania Ave Washington DC DC Northwest Bikes 108th Ave Seattle WA Figure 5: GBI US Customer List 2011 SAP AG Page 6

7 Internet Sales Due to the highly technical nature of its products, GBI has embraced the internet primarily as an information channel, maximizing its potential for educating consumers and partners and marketing its products to a large audience. Since GBI s main sales channel is through specialty resellers and there are complex tax issues associated with selling in multiple states and countries, they have a limited amount of internet sales. Production Plants GBI operates two production facilities, Dallas and Heidelberg. Each facility has three assembly lines and can produce around 1000 bikes per year. Total production capacity is roughly 6000 bikes per year, but can be increased by 15%-20% by using overtime hours and part-time workers. GBI has outsourced the production of both off-road and touring frames and the carbon composite wheels to trusted partners who have specialty facilities to fabricate the complex materials used. GBI maintains very collaborative research and design relationships with these specialty partners to ensure that innovations in both material and structural capabilities are incorporated into the frames. GBI primarily assembles semi-finished goods into finished goods at its production facilities. Finished goods are either stored in the local warehouse or shipped to other regional distribution centers to fulfill customer orders. Partner Network GBI has established an extensive partner operation to ensure process continuity between GBI and its partners to deliver best-in-class products for its customers. Special attention has been paid to nurturing strong relationships with suppliers and GBI is generally the largest customer of its main suppliers SAP AG Page 7

8 Vendor Name Street City State Olympic Protective Gear Summit Boulevard Atlanta GA Boomtown Tire & Wheel Walnut ST Cincinnati OH Dallas Bike Basics N O'Connor Blvd Irving TX Lightbulb Accessory Kits Thornall St Edison NJ Space Bike Composites Richmond Ave Houston TX Night Rider Aluminum Products S Front St LaCrosse WI Spy Gear Greensboro Dr. McLean VA Rapids Nuts n Bolts Eagleview Blvd Grand Rapids MI Green Blazers Seats 68th Parkway SW Portland OR Fun n the Sun Seats n Bars Blue Lagoon Dr. Miami FL Sunny Side Up Tire N. Scottsdale Road Scottsdale AZ Redwood Kits Palomar Airport Rd. Carlsbad CA Figure 6: GBI US Vendor List Information Architecture During 2009, GBI integrated a shared services model for all IT functions, located in the Dallas office. Along with this move to centralized IT, GBI also implemented SAP ERP (version 6.0). Prior to this, divisions were running multiple, independent application environments. All ERP functions are centralized with the primary objectives to reduce costs and deliver best-in-class technology to all divisions globally. This centralized approach offers GBI an advanced business platform under a highly controlled environment, which enables consistency of operations and process integrity across the globe SAP AG Page 8

Global Bike Inc. Background and overview of GBI strategy and operations.

Global Bike Inc. Background and overview of GBI strategy and operations. Product SAP ERP G.B.I. Release 6.07 Level Beginner Focus Company Background Authors Simha Magal Stefan Weidner Jeff Word Version